Using the information provided in Example 11.3 of your textbook, suppose that another year has passed, and the interest rate remains at 10%. The portfolio manager needs to examine again her position. Is the position still fully funded? Is it still immunized? If not, what actions are required?

TABLE 11.3 Duration of annual coupon bonds (initial yield to maturity = 6%) Coupon Rate 4% 2% 6% 8% Maturity (years) 1.000 1.000 1.000 1 1.000 4.786 5 4.611 4.465 4.342 7.445 10 8.961 15.170 8.281 13.216 17.667 7.802 12.158 20 11.495 Infinite (perpetuity) 17.667 17.667 17.667 For example, at a 15% yield, the duration of a perpetuity that pays $100 once a year forever is 1.151.15 = 7.67 years, while at a 6% yield it is 1.061.06 = 17.67 years. Equation 11.4 makes it obvious that xaturity and duration can differ substantially. The maturity of the perpetuity is infinite, while the duration of the instrument at a 15% yield is only 7.67 years. The present value-weighted cash flows early on in the life of the perpetu- TABLE 11.3 Duration of annual coupon bonds (initial yield to maturity = 6%) Coupon Rate 4% 2% 6% 8% Maturity (years) 1.000 1.000 1.000 1 1.000 4.786 5 4.611 4.465 4.342 7.445 10 8.961 15.170 8.281 13.216 17.667 7.802 12.158 20 11.495 Infinite (perpetuity) 17.667 17.667 17.667 For example, at a 15% yield, the duration of a perpetuity that pays $100 once a year forever is 1.151.15 = 7.67 years, while at a 6% yield it is 1.061.06 = 17.67 years. Equation 11.4 makes it obvious that xaturity and duration can differ substantially. The maturity of the perpetuity is infinite, while the duration of the instrument at a 15% yield is only 7.67 years. The present value-weighted cash flows early on in the life of the perpetu